SMM Morning Comments (Mar 22): Base Metals Closed Mixed on Expectations for Eased Rate Hikes

SHANGHAI, Mar 22 (SMM) - LME and SHFE base metals closed mostly mixed last night. On the macro front, the market expects that stress in the banking sector may keep the Fed and Bank of England from raising interest rate or raising it sharply this week. In addition, concerns over the banking crisis eased, prompting some investors to cautiously return to high-risk assets. And the US dollar index fell overnight.

Copper: LME copper prices closed at $8,782/mt last evening, up 0.92%. Trading volume was 17,000 lots and open interest stood at 244,000 lots. The most active SHFE 2305 copper contract finished at 68,110 yuan/mt overnight, up 1.07%. Trading volume was 55,000 lots, and open interest stood at 156,000 lots.

On the macro front, the market expects that stress in the banking sector may keep the Fed and Bank of England from raising interest rate or raising it sharply this week. In addition, concerns over the banking crisis eased, prompting some investors to cautiously return to high-risk assets. And the US dollar index fell overnight. In terms of fundamentals, warrants in Shanghai have been offered for sale recently, and imported copper is still flowing into the spot market, which may deal a certain blow to the quotes in the spot market. In addition, near the end of the month, in order to meet the demand for long-order delivery, some traders received goods at low prices in the market to support the spot transaction price. Copper prices rebounded yesterday, but due to little change in consumer demand, downstream buyers pushed for lower prices. Refineries were not willing to sell cargoes, and the overall transaction was quiet. In terms of consumption, due to the limited increase in demand, most of the trades were done at lower prices, and it is expected that there will be little demand improvement in the short term. Copper prices rebounded sharply as the market awaited Fed interest rate hike.

Aluminium: The most active SHFE 2305 aluminium contract closed at 18,155 yuan/mt overnight, an increase of 45 yuan/mt, or 0.25%, from the previous trading day. LME aluminium closed at $2,269/mt, down $14.5/mt or 0.63%, from the previous trading day.

On the macro level, the risk of overseas banks has been downgraded and the market generally believes that the Fed may slow down raising interest rates. The US dollar index fell and metals rose overnight. On the fundamentals, the domestic supply side has recovered slightly, and the current improvement in downstream consumption has driven the rapid destocking of aluminum. With strong support from fundamentals, aluminum prices will remain rangebound in the short term.  

Lead: LME lead opened at $2,109/mt last night and fell 0.38% to $2,107.5/mt, with the highest and lowest prices at $2,134.5/mt and $2,076/mt respectively. The open interest rose 3 lots to 105,000 lots, and trading volume increased 2,149 lots to 5,817 lots.

The most-traded SHFE 2304 lead contract opened at 15,435 yuan/mt and closed at 15,340 yuan/mt, down 0.13%, after briefly hitting the lowest point at 15,320 yuan/mt. Open interest fell 4,032 lots to 25,863 lots, and trading volume declined 18,963 lots to 17,382 lots.

Zinc: Overnight, LME zinc opened at $2,896/mt and closed down $25/mt or 0.86% at $2,873/mt. The trading volume was 7,411 lots, and open interest lost 333 lots to 184,000 lots. LME zinc inventory added by 2,475 mt to 39,850 mt. The growing LME zinc inventory has limited support for LME zinc prices. The premiums of LME cash to 3M contract fell to $27/mt. Although the concentration of capitals weakened, the bearish macro sentiment still lingered, thus LME zinc prices may maintain fluctuating at lows.

The most-traded SHFE 2305 zinc contract opened at 22,410 yuan/mt and closed at 22,265 yuan/mt, down 105 yuan/mt or 0.47%. Trading volume stood at 89,000 lots, and open interest gained by 4,089 lots to 93,000 lots. The spread between front-month next-month SHFE zinc contracts are expanding, enhancing the bearish sentiment among downstream enterprises. The spot trading has gradually dropped, and the zinc ingot social inventory across seven markets in China has fallen to 165,000 mt. However, the downstream demand recovery is still sufficient to underpin SHFE zinc prices.

Tin: SHFE 2304 tin contract rose last night and close at 187,470 yuan/mt, up 1.01%.

On the fundamentals, the warrants inventory fell slightly and the spot market turned cold amid rising tin prices. In the spot market, the discounts of small brands remained stable. The supply of imported tin was sufficient.

The SHFE 2304 tin contract rose yesterday night and close at 187,470 yuan/mt, up 1.01%. Open interest decreased by 5,914 lots to 44,382 lots.

To sum up, the current tin prices were still suppressed by the weak demand from downstream enterprises. Downstream processing companies cannot actually digest inventory by stocking up at low prices, and they still need to pay close attention to the progress of consumer confidence restoration.

Nickel: On the supply side, SHFE nickel prices hovered at lows. Spot nickel trading remained sluggish on the slight rise in premiums. The average price of SMM Ni 8-12% high-grade NPI was 1,200 yuan/mtu (ex-factory, tax included), flat from the previous trading day. Frequent news of production reduction and shutdown of stainless steel mills were bearish for NPI prices. On the demand side, the inquiries and transactions were still weak amid short restocking period. Traders were less willing to pick up goods, hence the spot supply of some specifications was tight. In general, the weak pure nickel demand weighed on the nickel prices.

[Disclaimer: The above representation and data is based on market information SMM believes to be reliable at the time of acquiring as well as the comprehensive assessment by SMM research team, and any and all information provided in this article is for reference only. This article does not constitute a direct recommendation for investment or any decisions in any form and clients shall act on their own discreet and any decisions made by clients are not within the responsibility of SMM.]